Gensource Announces Execution of Take-or-Pay Off Take Agreement

Gensource Potash (TSXV:GSP) is pleased to announce that, pursuant to the Asset Purchase Agreement (“APA”) announced April 6, 2016, it has completed negotiations for and executed a definitive off take agreement (“Off Take” or “Agreement”) with Yancoal Canada Resources Co. Ltd. (“YCR”).

The Off Take defines the terms for the future purchases of potash by YCR from one of Gensource’s proposed new potash production facilities planned to be located on the new subsurface mineral leases KL 244 and KL 245 (“Lease” or “Leases” – such leases being the former potash exploration permits KP 363 and KP 483, which were the subject of the APA and which will be acquired by Gensource pursuant to the APA). Today’s announcement completes the second of three major items required to formally close the APA. The three major items include: 1) payment by Gensource of the required price in escrow – Status: Complete; 2) execution of a formal Off Take Agreement – Status: Complete, and; 3) conversion of the subject exploration permits to subsurface mineral leases and transfer of those Leases to Gensource – Status: Underway. Leases have been issued and have submitted to the Government of Saskatchewan for transfer to Gensource. Once the Leases are transferred to Gensource, the APA will close.

Key features of the Off Take Agreement are:

• Product tonnage: 250,000 tonnes / year to be purchased by YCR, which is 100% of the planned production capacity of one of Gensource’s small scale potash production facilities.
• Term of and initial 5 years with options to extend, with the proviso that production begins within 5 years of the effective date of the Agreement.
• Take or pay commitments and industry standard penalties included as part of the Agreement.
• Product delivery terms provide for flexibility: FOB basis for delivery within North America; CFR basis for delivery outside of North America.
• Product pricing is based on a benchmark price determined from major contract sales prices appropriate to the delivery location.
• The Agreement requires board of director approval by YCR’s parent company, Yanzhou Coal Mining Company, such approval to be sought to coincide with the completion of Gensource’s planned feasibility study for the project, by the end of Q1 2017.
• Standard Incoterms, letter of credit, payment and Force Majeure terms are included in the Agreement.

Gensource’s President & CEO, Mike Ferguson, said, “This accomplishment represents a key milestone for Gensource as we press forward with development plans that we have come to describe as “Potash 2.0”. While that is our own label, its meaning is significant. It speaks to a new path in the potash industry – one that is defined by a new business model driven by a new and more prominent place in the industry for the customer. It also makes reference to clearly superior technologies and techniques that Gensource plans to employ in the production of potash. These new, proven, methods provide the foundation for a potash production facility that is small, efficient, exceedingly low cost and scalable. Further, they result in a significantly reduced environmental footprint because they leave no salt tailings on surface, require no precious fresh surface water and are energy efficient. This Agreement provides the certainty Gensource is looking for and therefore the confidence to move forward with its project plans: with 100% of the product “pre-sold”, based on this Agreement, we will move ahead with the next stage of study towards developing the first small scale facility in the Vanguard area.”

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